From Profit To Purpose – Part II

Hi there, it took me longer than I expected to write this second part. Mostly, because life goes on and business interferes with private projects like this newsletter. If you don’t remember the last issue, read it here.

Current Business Models

Before we dive into the second part, I’d like to share the feedback I’ve received from Mark Schiefelbein. He’s a subscriber to this newsletter and works at Revue (the provider of this newsletter). He wrote:

You touch on an interesting topic, and I often find myself torn between two beliefs here. I do believe in free markets, but I also see a lot of that go wrong when you look at the problems around fake news, or also simply the success of media […], that clearly do not uphold necessary journalistic standards.

I’m a bit more optimistic, though, as reliable publishers seem to be successful online for the first time. So I would give the current system a little bit more time to righten itself.

Now, Mark touches on the two beliefs I described in the first issue: the trust in free markets and the confidence in the purpose of journalism. And Mark certainly has a point: We see reliable publishers operating successfully in the digital space. The New York Times, for example, with their impressive number of subscribers. They just announced that they now have 6 million subscribers.

Or The Guardian with voluntary contributions without having a paywall. They can pull these business models off because they publish in English and reach a global audience.

However, smaller markets like Switzerland, the Netherlands, or Denmark that also have a unique language, struggle with either paywalls or advertising-based models. Maybe that’s the reason why we see successful membership-based models as in the Republik, De Correspondent, or Zetland in those countries.

I find the membership model quite intriguing because the reason to buy is not the mere exchange of service (money vs. information) but the editorial vision. Membership models try to rally people behind a purpose. That in itself brings problems if we think about filter bubbles. But if the cause is broad enough (for example: providing quality journalism), different mindsets can still be ready to support the organization.

Creating A Blue Ocean

Also, member-funded media often encloses its content behind a wall to sustain its ‘club feeling’. So, there’s the danger that critical reporting cannot reach the audience it should. Therefore, membership models also rely on mass media to multiply their reach.

That sets the stage: I will talk about mass media here. About the most prominent, privately-owned news platforms.

So, let’s think about our goals. We want:

  • to reach a majority of people with quality journalism.
  • to run a sustainable business.

The first goal is an endless discussion. The second one is the defining challenge. Media companies have a lot of competition not only amongst each other but also with Google or Facebook about advertising money. The latter two are the real threat to the advertising revenue – a competition that’s almost impossible to beat.

There’s a framework for business transformation called ‘Blue Ocean Strategy’ that describes this wicked problem quite well:

Although not every aspect of the ‘Blue Ocean Strategy’ makes sense in the context of journalism, there’s at least one point that stands out: Make the competition irrelevant.

We’ve now come full circle to the end of the last issue, where I wrote: “For journalism to succeed sustainably and build a resilient system, we have to exclude journalism from the profit-driven mindset.”

This sentiment aligns with the idea of creating a ‘Blue Ocean’ but also with the latest proposal of Simon Sinek. In his new book, ‘The Infinite Game,’ he states that – according to game theory – that economy is an infinite game that can’t be won. It’s all about staying in the game.

If you want to know more about Sinek’s approach, I highly recommend this video:

A New Foundation

How could a manifestation of a ‘Blue Ocean’ for journalism be shaped in a way that the organization can play the infinite game? One option is to come up with a stunning idea. But let’s be honest here: It’s not likely that legacy companies are able to do that.

Nevertheless, there’s one form of an organization that might provide a solution: the foundation. In Switzerland, laws around foundations are stringent. The money is dedicated to a specific purpose, and using it otherwise is almost impossible. A foundation can provide a resilient basis for journalism. On top, a variety of revenue streams can be built that provide the foundation with new funding: advertising, contributions, memberships, subscriptions, events, education, and many more.

The setup sounds pretty dull, but the value a foundation creates is in the mindset. Because the money is locked towards a specific purpose (e.g., keep the news platform XY running), there’s no way for shareholder interests to gain unhealthy weight. Instead, profits are fed back into the foundation because that’s what keeps the platform alive. Profits can still be a target, but they will stay within the journalistic realms to cover bad years or invest in new ideas.

Further, the likelihood of raising money from state initiatives or other foundations might increase due to abandoning the shareholder value dogma. The foundation also acts as a defensive wall for the editorial side to minimize the influence of the people providing the funding. They fund the foundation and its purpose, not the operation itself.

Final Thoughts

Extracting a profit-driven enterprise and transforming it into a non-profit mindset with a foundation is quite a big leap. However, I’m convinced that the needed cultural shift within the organization away from shareholder value is more likely to succeed in said way. Doing it by incremental steps might take too long for the operation to survive. A profound change is requested.

So, I don’t know if my idea is any good. I just played with some ideas, and that’s what I came up with. Quite possibly, it’s not thought through until the end. I might have overlooked some crucial details. Nevertheless, the feeling of a need to change is the only certainty I have.

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